Commentary

Overview

In Australia mergers are prohibited if it can be demonstrated that they will have the effect or likely effect of substantially lessening competition in a market (section 50 CCA). It is possible to obtain clearance (formal or informal) or authorisation for proposed mergers, but there is no mandatory notification process. Clearance will be granted only if the ACCC does not believe the merger will SLC (s 95AN). Authorisation, on the other hand, may be granted by the Australian Competition Tribunal even where the merger will SLC if it can be demonstrated that the merger would lead to such a benefit to the public that it should be allowed to occur (s 95AZH).

Section 50A deals with mergers occurring outside Australia.

History

The original Trade Practices Act 1974 applied a substantial lessening of competition test - specifically, it prohibited the acquisition of assets and shares, which resulted in a substantial lessening of competition in a market for goods or services.

In 1977 the substantial lessening of competition test was replaced with a market dominance test by the Trade Practices Legislation Amendment Act 1977. As a result, acquisitions were only prohibited where they resulted in or substantially strengthened a ‘position to control or dominate a market’. This was (generally) considered a higher threshold so that less mergers were captured.

In 1989, the House of Representative Standing Committee on Legal and Constitutional Affairs (the Griffiths Committee) recommended retaining the dominance test in its report ‘Mergers, Takeovers and Monopolies: Profiting From Competition?’.

Shortly thereafter, however, the Senate Committee on Legal and Constitutional Affairs (the Cooney Committee). It recommended that the test in s 50 be lowered to prohibit acquisitions or mergers that substantially lessen competition in a market. This change was introduced by the Trade Practices Legislation Amendment Act 1992 which also introduced a provision for the substantial lessening of competition test in relation to trans-Tasman mergers and introduced a non-exhaustive list of matters to be considered by the Courts when determining if a merger substantially lessened competition (s 50(3))

In 2002, numerous submissions were made to the Dawson Committee recommending that the substantive test for mergers change back to one of dominance, incorporate an ‘efficiency’ test or incorporate a public benefit test. The Dawson Committee recommended that the substantive test of ‘substantial lessening of competition’ be retained.  This was accepted by the government and no legislative change has been made to the substance of the prohibition.

The Dawson Committee did, however, make recommendations relating to merger clearance and authorisation processes that were introduced by the Trade Practices Legislation Amendment Act (No 1) 2006. For more details on the Committee's discussion of mergers and the submissions made to the Committee relating to mergers see:   Julie Clarke, 'The Dawson Report and Merger Regulation' (2003) 8(2) Deakin Law Review 245

From the mid 2000's to early 2010's there was a current push for the introduction of provisions to deal with creeping acquisitions. This resulted in the introduction of a bill (the Competition and Consumer Legislation Amendment Bill 2010) proposing two changes to s 50. The first was the removal of the requirement, in s 50(6) that a market be a 'substantial' market. The second was to replace the words ‘a market’ in section 50(1) with ‘any market’. It is widely assumed these changes would simply give legislative effect to existing practice. The bill lapsed following the calling of a federal election in 2010 but on 15 June 2011, but was revived in the form of the Competition and Consumer Legislation Amendment Bill 2011 which became the Competition and Consumer Legislation Amendment Act 2011 and entered into force in February 2012.

The Harper Panel considered the Report in 2014-2015 and made no recommendation for substantive change to s 50.

Acquisition of shares or assets

Note that s 4(4) provides that

"In this Act:

(a) a reference to the acquisition of shares in the capital of a body corporate shall be construed as a reference to an acquisition, whether alone or jointly with another person, of any legal or equitable interest in such shares; and

(b) a reference to the acquisition of assets of a person shall be construed as a reference to an acquisition, whether alone or jointly with another person, of any legal or equitable interest in such assets but does not include a reference to an acquisition by way of charge only or an acquisition in the ordinary course of business.

Reading

For more articles relating to merger law and policy generally, see the mergers page.

Julie Brebner, ‘The Relevance of Import Competition to Merger Assessment in Australia’
(2002) 10(2) Competition and Consumer Law Journal 119-143

Morelle Bull and Danielle Wood, 'The fairest of them all? Rival bidder counterfactuals in Australian merger clearance' (2012) 19 CCLJ 231

Julie Clarke, 'The Dawson Report and Merger Regulation' (2003) 8(2) Deakin Law Review 245

Stephen Corones, 'Will there be a change in the review of mergers by the Australian Competition and Consumer Commission after the Metcash Decision' (2012) 40 Australian Business Law Review 55

A I Tonking, 'Section 50 - Controlling Mergers into the Future' (1992) 20 Australian Business Law Review 285

Cento Veljanovski, "Metcash, Market Power, and Counterfactuals - The standard of proof in Australian and New Zealand merger and competition laws" (paper given at the 20th Competition Law Conference, 5th May 2012, Sydney, Australia)

Guidelines

• ACCC Merger Guidelines (November 2008) ➤
  Final Guidelines released 21 November 2008 and replace the 1999 Guidelines ➤

• ACCC Informal Merger Review Process Guidelines 2013 ➤
  (Updated 2017 to reflect Harper reforms)

• ACCC Merger Review Process Guidelines (July 2006) ➤

• ACCC Merger Authorisation Guidelines (2018) ➤

• ACCC Media Merger Guidelines (2017) ➤

• ACCC Gun Jumping Risks For Merger Transactions Guidance (2019) ➤